Morgan Stanley Stock Soars 6% as Record Wealth Management Revenue Exceeds Expectations

‍Morgan Stanley reported fourth-quarter earnings on Tuesday that were better than what analysts had expected. The bank’s wealth management business had record revenue, and its trading business also saw growth.

After the results were announced, the company's stock prices rose by more than 6%. This caused many investors to buy more shares in the company.

In the fourth quarter, net income fell to $2.11 billion, or $1.26 per share, from $3.59 billion, or $2.01 per share, a year ago. However, this still topped the analyst estimate of $1.19 per share from Refinitiv.

Profit has been hurt by a slowdown in deal-making over the past year, prompting the New York-based company to cut about 2% of its staff in December. The job reductions impacted about 1,600 of its 81,567 employees and touched nearly every corner of the global investment bank. The firm posted severance costs of $133 million in the latest quarter.

Morgan Stanley reported earnings of $1.31 per share, excluding certain expenses and a tax gain of $89 million.

Revenue for the quarter came in at $12.75 billion, down from $14.52 billion a year ago, but higher than the $12.64 billion that Wall Street analysts were expecting, according to data from Refinitiv.

"We reported solid fourth quarter results amidst a difficult market environment," Chairman and CEO James Gorman said in a statement. "Overall, 2022 was a strong year for the Firm as our clear strategy and balanced business model enabled us to deliver an ROTCE of 16% despite the complex macro backdrop."

The company's wealth management business posted record net revenue of $6.63 billion in the latest quarter, 6% higher than a year ago. The result was helped by an increase in net interest income on higher interest rates and bank lending growth, the bank said.

Trading revenue increased to $3.02 billion from $2.39 billion a year ago. This increase was driven by higher trading volume and improved market conditions.

Revenue from equity investments fell 24% from the previous year, due to markdowns on certain strategic investments and lower brokerage balances. However, fixed income net revenue rose by 15% over the same period, driven by stronger results in macro and credit products.

The firm's investment banking business suffered a significant slowdown in the fourth quarter, with revenues falling 49% year-on-year to $1.25 billion. The bank attributed the decline to a sharp drop in global equity underwriting volumes and fewer completed M&A transactions.

Morgan Stanley's investment management division reported revenue of $1.46 billion, a 17% decline from the previous year. The bank attributed the decline to the extreme market volatility caused by the Federal Reserve's aggressive rate hikes. As a result of the volatility, the bank's assets under management shrank to $1.30 trillion from $1.57 trillion.

In the latest quarter, the bank set aside $87 million for credit losses, compared with $5 million in the same quarter a year ago. This increase is due to the current economic conditions.

Morgan Stanley's stock price has increased by nearly 8% so far this year, after falling by 13% in 2020.